Tata Motors Passenger Vehicles Ltd. share price target

We recommend a BUY on Tata Motors with a Target Price of Rs 150, an upside of ~10% from CMP of Rs. 136 and Stop Loss Rs 131.

Domestic CV and PV outlook positive for 2HFY21. TTMT's 2QFY21 results were a mixed set with JLR margins at 11.1% (PLe 9%, -230bp YoY) while S/A margins at 2.9% (PLe 5%). JLR is seeing better volume recovery post Covid in key markets like UK and China with retail sales improving to 113.6k units in 2Q (v/s 74.1k units in 1Q). However, key overhang such as no deal Brexit, increasing covid cases in European markets and emission compliance norms continue to persist. Any favorable outcome from...

2QFY21 marked initial signs of volume recovery, the benefit of mix, and costcutting initiatives coming together. This coupled with normalcy in working capital as well as tight control on capex resulted in FCF turning positive. JLR's near-term volumes may be at risk from a potential second wave of COVID. However, mix improvement and tight cost/capex control would drive sharp improvement in operating performance and debt reduction. We upgrade our FY22E EPS by 13% to factor in lower tax in JLR (reversal of deferred tax). Maintain Buy, with TP of INR230 (Sep'22 SOTP)....

Quick Research Note

We recommend a BUY on Tata Motors with a Target Price of Rs 150, an upside of ~9% from CMP of Rs. 137 and Stop Loss Rs 131.

10 September 2020 business-level FCF generation, b) the monetization of non-core assets, and c) top-up equity (if required). revenue improvement, b) cost-cutting, and c) capex control plans laid out for four key businesses (incl. Capex plans laid out for FY21 (GBP2.5b for JLR and INR15b for the India business) would not see any material change in the foreseeable future. As the monetization of non-core assets begins with the Tata Technologies and Hitachi JV (construction equipment), it would look at other assets as well. However, currently it has no plans to monetize its stake in Tata Sons. The partnership between the PV segment and JLR is not the key part of its deleveraging strategy. Demand recovery is visible across markets in the US, UK, EU, and China. Only RoW markets are yet to see recovery. JLR is seeing an additional boost from strong demand for the recently launched Evoque and Defender.

Media reports suggest that the top management of Tata Motors (TML) at its recent AGM expressed an intent to reduce automotive debt (~| 48,000 crore as of FY20) to near zero levels in the next three years. This follows the recent guidance of turning JLR, Indian operations sustainably FCF positive (from FY22E, FY21E respectively). While the intent is encouraging, we remain slightly circumspect about the deleveraging timeline, given that positive FCF from FY22E will continue to be accompanied by critical capex for new product development and new age technologies i.e. ACES. As per our...

Early signs of recovery in sales can be seen from July onwards, however the near-term performance expected to remain bleak. Maintaining a cautious outlook, we reiterate our HOLD rating on the stock with a revised target price of Rs. 119 based on SOTP valuation methodology....

and retailer shutdowns for major part of the quarter and heavily impacted the volumes. Negative operating leverage impacted the performance significantly. The auto major reported a pre tax loss of Rs 6,183.73 in Q1 June 2020 as against pre tax loss of Rs 3,238.18 crore in Q1 June 2019. Total tax expense stood at Rs 2,200.49 crore in Q1 June...

JLR's Q1FY21 negative FCF (1.2 billion) was 500 million better than previous guidance (included 1.1 billion in working capital outflows expected to reverse as production ramps up) while India negative FCF of | 4,300 crore was lower than guidance by | 700 crore. Amid ongoing focus on costs, capex, both businesses committed to turning FCF positive (JLR from FY22E in sustainable manner, standalone from FY21E) while also reducing debt levels from FY22E onwards. However, outlook on volume growth remains clouded by the evolving pandemic situation in different...